Correlation Between Aluminum and China Resources

Can any of the company-specific risk be diversified away by investing in both Aluminum and China Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aluminum and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aluminum of and China Resources Beer, you can compare the effects of market volatilities on Aluminum and China Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aluminum with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminum and China Resources.

Diversification Opportunities for Aluminum and China Resources

-0.03

Correlation Coefficient

Aluminum  China Resources

Good diversification

The 3 months correlation between Aluminum and China is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer and Aluminum is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aluminum of are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Aluminum i.e., Aluminum and China Resources go up and down completely randomly.

Pair Corralation between Aluminum and China Resources

Assuming the 90 days horizon Aluminum of is expected to generate 1.13 times more return on investment than China Resources. However, Aluminum is 1.13 times more volatile than China Resources Beer. It trades about 0.03 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.06 per unit of risk. If you would invest  58.00  in Aluminum of on October 25, 2024 and sell it today you would earn a total of  1.00  from holding Aluminum of or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aluminum of  vs.  China Resources Beer

Aluminum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aluminum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Resources Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Beer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aluminum and China Resources

The main advantage of trading using opposite Aluminum and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminum position performs unexpectedly, China Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Resources will offset losses from the drop in China Resources' long position.

The idea behind Aluminum of and China Resources Beer pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.